XBTSM bitcoin futures are likely headed for their highest volume week on record amidst considerable selling pressure.
Cryptocurrencies have been under pressure across the board this week. XBT bitcoin futures (April contract) declined 2,310 handles from high (9,990) to low (7,680), or 23.1%.
The March XBT futures contract expired on Wednesday (3/14), and cash-settled at $8,336.11. The last print on March futures ahead of the Gemini auction for settlement was 8,310. That is the third expiration cycle for XBT futures, and the process is uniform every month. The expiring futures contract trades until 2:45 p.m. Central Time and then halts. All open expiring agreements then cash-settle based on the 3:00 p.m. Central Time Gemini Auction price.
Based on open interest (OI) figures, most of the expiring futures were either rolled or closed in advance of expiration. OI in the April contract moved from less than 400 three weeks ago to 4,852 by Thursday, when it became lead month.
Volume across the term structure, particularly in March and April, was solid all week. When evaluating volume on a weekly basis, the average since introduction in December 2017 has been 6,740 contracts. The week of January 15-19 (week 6) had an average daily volume (ADV) run of 11,705. That week shortened by a holiday (MLK Day), so all volume from Sunday night and Monday morning was calculated on January 16, which skews the average slightly higher.
ADV this past week, through Thursday, is a robust 12,322. Unless activity falls dramatically on Friday, March 16, this should be the most active week on record for XBT futures. The April futures traded 14,139 contracts on Thursday. That’s the most active single day for an XBT contract. The previous high occurred on December 22, when the January futures had a nearly 29% H/L ranged and traded 12,554 contracts.
Cryptocurrencies were under pressure over the last week as the SEC continues to warn about unregulated exchanges and crack down on initial coin offerings (ICOs). The overwhelming majority of existing digital asset exchanges are unregulated, which can pose some potential problems for investors. To be clear, XBT futures trade on the heavily regulated Cboe Futures Exchange (CFE). The U.S. Commodity Futures Trading Commission (CFTC) oversees all domestic futures exchanges, including CFE. Cboe partnered with Gemini for the settlement values. Gemini is a regulated New York-based trust company. They are subject to capital reserve requirements, cybersecurity, and banking compliance standards.
Finally, Google indicated that it intends to “change its advertising policy for certain financial services, including cryptocurrencies, starting in June.” Google is the preeminent search engine as well as a digital advertising hub. They are following the lead of Facebook about cryptocurrency advertising, which extends to initial coin offerings and cryptocurrency trading advice.
If you are new to bitcoin, or futures in general, download The Beginners Guide to Bitcoin Futures.